Debt debate: No easy path to avoid chaos

If you thought the fiscal cliff was bad, just wait for the triple threat.

The White House and Congress are facing three critical deadlines — the country hits its debt limit as early as mid-February, $1.2 trillion in automatic spending cuts take effect March 2, and the government runs out of money to fund operations later that month.

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GOP talks default: POLITICO’s ‘Behind the Curtain’

Obama: No ‘ransom’ for debt ceiling

There is no real optimism among Republicans and Democrats that the standoff will end quickly, or painlessly. The strategy of each party rests largely on the other one folding.

President Barack Obama says he absolutely won’t forfeit anything in return for an increased borrowing limit. House Speaker John Boehner (R-Ohio) says he won’t permit an increased borrowing limit unless spending is sliced by the same amount. Republicans won’t raise taxes any further, even as the president insists that any package is divided equally between cuts and revenue. And congressional Democrats are still hoping Obama acts unilaterally to resolve the debt standoff.

It’s even unclear whether the explosive fiscal trio will be handled together or apart: Some House Republican leaders want to deal with the three deadlines separately, while others would negotiate them together. But the triple threat may hit sooner than originally thought; Treasury Secretary Timothy Geithner told Boehner in a letter Monday that the debt limit may need to be raised by mid-February, rather than the end of that month.

Here are POLITICO’s five bets on how the crises could play out:

Apply a Band-Aid

When all else fails, Washington opts for short-term fixes.

Soit’s not surprising that Boehner’s chief of staff told a gathering last week at the Republican National Committee headquarters that Congress may end up raising the debt ceiling every month or every three months.

The idea is gaining ground among Republicans as a tactic to wear down Obama and force him to cut spending, repeatedly and deeply.

But Democrats won’t go for it, unless they are convinced Republicans are ready to throw the country into default. The West Wing truly believes that Boehner and Senate Minority Leader Mitch McConnell (R-Ky.) will never allow that to happen, so Republicans have no leverage, according to a source familiar with White House thinking.

The business community, Wall Street and credit-rating agencies would also oppose a month-by-month approach. Democrats see it as extraordinarily damaging to the president’s second-term agenda.

“We shouldn’t be doing this on a one-to-three-month time frame. Why would we do that?” Obama said at a news conference Monday. “We can’t manage our affairs in such a way that we pay our bills?”

Even if Republicans cave on the debt ceiling and raise it for an extended period, they could force short-term patches for the sequester and a bill to fund government agencies as a way to extract deep spending cuts.

Steven Bell, a longtime budget aide to former Sen. Pete Domenici (R-N.M.), said he views this as the most likely scenario: extend the country’s borrowing authority for three months and allow the sequester to kick in.

“Do not underestimate the number of people who are really frustrated, really unhappy, who are saying I’m not going to do this anymore,” said Bell, senior director of economic policy at the Bipartisan Policy Center. In their view, the sequester “is the only way to get real cuts.”